When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

A. shareholders cannot observe all of the CEO's decisions.
B. shareholders require the firm to pay a dividend.
C. shareholders sign confidentiality agreements.
D. the CEO is paid in part with stock options.
E. shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits.


Answer: A

Economics

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